T V Narendran, CEO and managing director of Tata Steel Limited.
T V Narendran, CEO and managing director of Tata Steel Limited.

The impact of the COVID-19-induced lockdown has come as a big blow to the steel industry. According to Care Ratings, India’s crude steel production fell by a record 69.5 per cent year-on-year in April 2020 (provisional). To understand the way forward for the steel industry at this juncture, FPJ-IIM Indore is organising a webinar on steel with T V Narendran, CEO and managing director of Tata Steel Limited.

The webinar is the concluding part of the series ‘India After COVID-19’ will be held on July 2 at 5.30 pm.

Click here for registration.

With the construction industry at a standstill, the term normalcy looks like a distant possibility. The only relief for steel industry is that it was listed as an essential commodity and was permitted to operate even during the lockdown period.

According to a Crisil survey, steel manufacturers are looking at ways to tide over during these troubled times. The manufacturers have been focussing on managing liquidity and cash flows in the near term. This decision was driven by the belief that there can be a contraction of 60-65 per cent in demand in the first quarter of fiscal 2021.

The trouble for the industry started brewing even before the COVID-19 pandemic hit the world. The consumption and production of steel were already showing a declining trend. The global slowdown was biting into the steel industry.

In March 2020, steel consumption growth dropped to 6.7 per cent, from 7.8 per cent in February 2020. The demand for steel contracted by 91 per cent year-on-year in April 2020, according to Care Ratings.

Trend in steel consumption
Trend in steel consumption
Care Ratings

In the month of April, only the top six integrated steel producers reported production. These steel companies were working at less than half of their capacities. “Small scale secondary steelproducers are unlikely to have reported any significant production as they are grappling with additional challenges of low working capital and depleting cash reserves under lockdown.

Trend in steel production
Trend in steel production
Care Ratings

The slowdown in demand from user industries like construction, real estate, auto and infrastructure which consumes 80 per cent of steel led to a sharp fall in steel production. Moreover, the construction sector which accounts for 50-60 per cent of the total demand for steel was under immense pressure in FY20 due to financing constraints and post-lockdown came to a near standstill.

It will be interesting to hear from Narendran on how he sees this steep drop in production and demand.

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